If your debt is past the Statute of Limitations a collection agency or creditor can still sue you in civil court as an attempt to obtain a judgment. So why does the Statute of Limitations (SOL) exist and how can you use it towards your defense? If you have any questions pertaining to this article please leave a comment at the end of this page. See also, Debt Prison related article Sample Debt Validation Letter.
**Disclaimer – Debtprison.net does not administer legal or financial advice. The contents of this website are my opinions on collection agencies and how to deal with them. Nothing on this website should be interpreted as legal advice or council. No opinions on this website should be used to replace the advice of your financial advisor or your legal council.
A statute of limitations (pertaining to debt) is a statute in our legal system that sets forth the maximum period of time, after certain events (default on payments), that legal proceedings based on those events may be initiated. The SOL for defaulted debt will vary state by state which you can look up by clicking here. The SOL can vary wildly… in New York it’s 6 years but in Ohio it’s 15 years (sucks to be in Ohio). The date on which you miss your first payment starts the clock on the SOL. For example, in Texas the SOL for defaulted debts is four years. So if you miss your first payment on August 30, 2008 – your creditor has until August 30, 2012 to file suit and still be within the SOL. So why would a collection agency or creditor file suit on defaulted debt after the SOL has expired?
You need to show up in court to defend yourself
Though the debt may be past the SOL… someone needs to show up in court and explain that to the judge. That someone should be you. So if your debt is past the SOL and you get served a summons for a civil suit from a collection agency – just make sure you walk into court on the assigned day and explain to the judge why the debt is past the SOL. The judge will then dismiss the case. It would be a good idea to take any paperwork into court with you to help support your defense.
If you fail to show up in court and defend yourself the collection agency will likely win a default judgment. So you want to make sure you show up in court to prevent the default judgment. Also, it would be a good idea to converse with the collection agency and try and convince them to drop the suit before the court date. Since their appearing in court and having their case dismissed would be a complete waste of their time…. not to mention yours. Sometimes it’s worth a phone conversation to convince the plaintiff that their case won’t stand up in court and therefore should be dropped.
Can the collection agency still sell my debt to another agency?
Selling debt is becoming a world wide industry. Junk debt buyers are buying up debts on which the SOL has expired and even debt that was absolved due to bankrtupcy. Why would a company buy such debt? Because many people will become intimidated and pay the debt. Most people simply don’t know their rights.
But can’t the clock on the SOL get reset?
Yes…. the clock on the Statute of Limitations can be reset by a couple of different circumstances. First, if you make any payment (no matter how small) on the defaulted debt the clock on the SOL will be reset. So in Texas the collection agency would then have a fresh four years to drag you into court to obtain a judgment. Also, in some states if you acknowledge, over the telephone, that you owe the debt or that you will try and make a payment – the SOL just got reset! So be careful what you say over the phone.
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